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China's CNOOC explores opening up LNG terminals under reform pressure

 CNOOC, China's biggest operator of liquefied natural gas (LNG) import terminals, is talking to independent companies about access to its facilities after short trial leases last year, three sources said.

The initiative, begun earlier this year, comes amid Beijing plans to form a national pipeline company by combining assets from state energy companies, in a reform of the sector that's intended to spur private investment and boost use of cleaner-burning natural gas.

Gas terminals and storage tanks, in which China National Offshore Oil Corp, parent of CNOOC Ltd, is among the top investors, could be the next assets to be transferred to the pipeline group that is likely to be launched this year, industry sources following the reform plan said.

CNOOC is offering pipeline developers such as ENN Energy and LNG distributors such as Longkou Shengtong Energy the chance to use its LNG terminals on China's east coast over a 10-year period, with a specified number of slots each year.

The business could reap state-run CNOOC tens of millions of dollars a year in relatively risk-free revenue.

Broader access to its 20 or so receiving terminals - all built by state majors except for a few by private firms including ENN - would likely boost LNG imports into China. China has been the world's second-biggest buyer of LNG since 2017, with its intake growing more than 40 percent a year in each of the past two years.

As an option to terminal access, CNOOC has also asked companies to offtake some of its import cargoes signed under term agreements with global suppliers, said two of the sources.

"The discussions about opening terminals ... is compatible with the broad state policy to connect LNG import facilities with main gas pipelines such as the West-to-East project," said a state oil LNG executive based in the southern city of Shenzhen. The executive declined to be named as he's not authorized to speak to press.

CNOOC did not respond to Reuters' request for comment.

CNOOC sold two five-day terminal slots late last year via open tenders, gaining 63 million yuan ($9.39 million) out of the sales.

In one of the deals, private firm Shengtong teamed up with state-owned Zhenhua Oil. The second deal was done by private LNG distributor Zhejiang Panergy.

The sales encouraged CNOOC to broaden the openings, and the latest initiative of offering long-term terminal access would also make CNOOC appear supportive of Beijing's push to open state infrastructure to third parties, the sources said.

Private firms, however, remained cautious.

"The prices paid for the access need to be regulated. Companies will need to think carefully whether they could pass on that cost to their consumers," said an executive with a city-gas distributor approached by CNOOC.

If CNOOC ties pipeline access to its term cargoes, which tend to be more pricey than the spot market, CNOOC's initiative could be a hard sell, said a second official with knowledge of CNOOC's plan.

 

($1 = 6.7089 yuan) (Reporting by Chen Aizhu and Jessica Jaganathan; Editing by Tom Hogue)


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